Court Rules for American Axle in Supply Dispute

Republic Engineered Products earns consideration on payments

Jun 24, 2009

A Michigan court has ruled for American Axle & Manufacturing Co. in its effort to force steelmaker Republic Engineered Products Inc. to continue supplying steel products according to the terms of their contract. However, the court ruled American Axle must speed up its payment schedule to Republic.

Earlier this month American Axle sought a preliminary injunction to force Republic Engineered Products to continue delivering steel according to the terms of a four-year contract agreed to in 2006. Republic claimed that American Axle is $1.8-million behind in its payments, and sought assurances of the drivetrain manufacturer’s ability to make future payments.

Republic also sought a higher price on the steel it delivers to American Axle, to compensate for its increased risk.

According to the Oakland County (MI) Circuit Court, American Axle must post a deposit with the court to secure its side of the contract, in an amount representing the difference between the rate of the current contract and the current market rate for the products.

In a statement, Republic indicated it is pleased that the court recognizes it is entitled to demand adequate assurance of performance from American Axle. “This ruling reaffirms our position that Republic never desired to refuse to ship product to American Axle, but rather we were entitled to do business under new terms and conditions in order to provide adequate assurance,” stated Ted Thielens, Republic exec. vice president.

In addition, the steelmaker stated it looks forward to presenting its position at a trial to determine the obligations of both parties to the contract.